Land Acquisition Collector, Haryana V. ITO (TDS), Hissar

ITA 4019/DEL/2019

AI Insights

The case involves the Land Acquisition Office, a division of the Haryana Development Authority, which was assessed for non-deduction of TDS on interest payments amounting to Rs. 7,92,55,734 during the assessment year 2015-16. The ITO (TDS), Hissar, issued a demand for Rs. 2,10,82,026, which was upheld by the CIT(A). The Land Acquisition Office appealed to the Income Tax Appellate Tribunal, arguing that the interest on enhanced compensation is part of the compensation and not subject to TDS, referencing decisions from previous years (2010-11, 2011-12, 2012-13) where similar arguments were accepted.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302711 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2023
• Appeal Filed By: Assessee
• Order Result: AllowedAllowedAllowedAllowedAllowedAllowed
• Bench Allotted: E
• Next Hearing Date: 22-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 05-05-2019
• Other Referred Cases: Jagmal Singh vs. State, Ghanshyam (HUF) vs. State
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; TDS; Capital Gains
• Section: 56; 28; 2(14); 201(1); 194A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 4019/Del/2019 Asstt. Year: 2015-16 O R D E R PER ASTHA CHANDRA, JM The appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana (“CIT(A)”) dated 13.02.2019 pertaining to the Assessment Year (“AY”) 2015-16. 2. The grounds raised by the assessee are as under:- “1. The Ld. CIT(A) and Ld. AO is bad in law and against the facts of the case. 2. That the Ld. CIT(A) erred in sustaining the addition made by the Ld. AO of Rs. 2,10,82,026/- on account of non-deduction of TDS u/s 194 A of the Act, though the same was not applicable to the assessee. 3. That the Ld. CIT(A) erred in sustaining the demand raised by the Ld. AO amounting Rs. 2,10,82,026/- u/s 201(1) & (1A) for failure on the part of the assessee to deposit TDS on interest payments. Land Acquisition Collector, Land Acquisition Office, Huda Complex, Sector -13, Hissar Haryana PAN : RTKL01046D Vs. ITO (TDS) Hissar (Appellant) (Respondent) Assessee by: Shri Pramod Jain, CA Department by : Shri Sumit Kumar Verma, Sr. DR Date of Hearing 23.03.2023 Date of pronouncement 16.05.2023 ITA No.4019/Del/2019 2 4. That the Ld. CIT(A) erred in rejecting the contention that payments made on account of interest on compensation /enhanced compensation forms part of compensation and not part of interest. 5. That the Ld. AO erred in not providing sufficient opportunity to the assessee for producing the supporting documents. 6. That the Ld. CIT(A) erred in not following various judgments of jurisdictional High Court and ITAT.” 3. The assessee i.e. Land Acquisition Office is a branch/division of Haryana Development Authority, statutory body constituted under Urban Development Authority Act, 1977. The ITO (TDS), Hissar on the basis of information in his possession noticed that the assessee has paid interest amounting to Rs. 7,92,55,734/- in 18 different cases during the previous year relevant to AY 2015-16 on which the assessee was required to deduct TDS under section 194A of the Income Tax Act,1961 (the “Act”) @ 10% which was not done. Show cause notice(s) issued to the assessee remained uncomplied with. The ITO (TDS) therefore passed order under section 201(1) and 201(1A) of the Act on 28.12.2017 and raised a demand of Rs. 2,10,82,026/- consisting of TDS @ 20% which comes to Rs. 1,58,51,147/- on interest paid i.e. Rs. 7,92,55,734/- and interest @ 1% for 33 months for non payment of TDS of Rs. 52,30,879/-. 4. On appeal filed by the assessee before the Ld. CIT(A), the assessee did not get any relief. This has bought the assessee before the Tribunal and all the grounds of appeal relate thereto. 5. At the very outset, the Ld AR submitted that the issue is covered by the decision of the Tribunal in assessee’s own case for AY 2010-11, 2011-12 and 2012-13 in favour of the assessee on identical facts. Copy of the decision is placed at page 1-13 of the Paper Book. The Ld. DR did not dispute the claim of the assessee. 6. We have heard the Ld. Representative of the parties and perused the records. Identical issue came up for consideration before the Delhi Bench of ITA No.4019/Del/2019 3 the Tribunal in assessee’s own case in ITA Nos. 39,40,41/Del/2021 for AY 2010-11, 2011-12 and 2012-13 and the Tribunal vide order dated 22.03.2022 recorded the following observations/findings: “7. We have heard the Ld. Representatives of the parties and carefully considered their arguments. We have also perused the material on record. The assessee is Land Acquisition Office and is governed by the provisions of Land Acquisition Act, 1984. The LAO acquired land from the land owners under compulsory acquisition for public purposes as per the directions of Haryana Urban Development Authority (HUDA). The land owners got enhanced compensation which was awarded by the court on which they received interest. 7.1 The issue for consideration is whether the impugned interest received by the land owners on enhanced compensation is ‘income from other sources’ under section 56 of the Act attracting the TDS provision enshrined under section 194A of the Act. In the assessment proceedings for the assessment year 2012-13 the assessee submitted before the Ld. AO that no TDS is required to be deducted on the interest payments which fall under section 28 of the LA Act relying on the decision of the Hon’ble Jurisdictional High Court in the case of Jagmal Singh (supra) and during appellate proceedings filed an affidavit that interest on enhanced compensation was paid to the recipient land owners under section 28 of the LA Act and submitted that the provision of section 194A do not apply for the reason that interest under section 28 is a part of the amount of compensation itself. It was pointed out that there is vital difference between interest awarded under section 28 and interest paid under section 34 of the LA Act. Interest under section 28, unlike under section 34 is an accretion in value and regarded as part of the compensation itself which is not the case of interest under section 34 of the LA Act. Interest under section 34 is for delay in making payment after the amount is determined. In the additional grounds taken before us also it has been urged that interest under section 28 of LA Act is in the nature of compensation and not interest which is taxable as income from other sources under section 56 of the Act. Following the judgment of Hon’ble Punjab & Haryana High Court in Jagmal Singh (supra) and the judgment of the Hon’ble Supreme Court in Ghanshyam (HUF) (supra) we hold that the interest received by the land owners on enhanced compensation awarded by the court is not in the nature of income from other sources under section 56 of the Act. Consequently, the TDS provisions of section 194A will not be attracted. 7.2 It has also been urged in the additional grounds that interest on enhanced compensation under section 28 of LA Act, being an integral part of consideration is exempt from capital gains tax under section 10(37) of the Act. We agree. Agricultural land situate in any area referred to in item (a) or item (b) of section 2(14)(iii) of the Act do not fall within the ambit of agricultural land and thus constitute ‘capital asset’ under section 2(14) of the Act. Compulsory acquisition of capital asset under any law is ‘transfer’ under section 2(47)(iii) of the Act. Accordingly, any profit or gain arising from transfer of such a capital asset is exigible to capital gains tax under section 45 of the Act in the previous year in ITA No.4019/Del/2019 4 which the transfer took place. However, capital gains arising from transfer of agricultural land situate in any area referred to in item (a) or item (b) of section 2(14)(iii) by way of compulsory acquisition under any law is exempt from tax under section 10(37) of the Act. Accordingly, any income by way of capital gains engrained in the receipt of compensation and/ or enhanced compensation is exempt in the hands of the recipient land owners. This is obvious from the reading of the provisions of section 10(37) of the Act. 8. In the light of the legal provisions set out above and following the judgment of the Hon’ble Supreme Court in Ghanshyam (HUF) (supra), we hold that interest received by the land owners on enhanced compensation awarded to them by the court under section 28 of the LA Act is not in the nature of income from other sources in the hands of the recipient land owners under section 56 of the Act and therefore, the LAO was not under any legal obligation to comply with the TDS provisions of section 194A of the Act. Accordingly, we allow the grounds raised by the assessee by way of additional grounds taken before the Tribunal. The assessee succeeds. The original grounds become infructous.” 7. In view of the decision (supra), the facts admittedly being similar, following the same, the grounds taken by the assessee are allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 16 th May, 2023. Sd/- sd/- (SHAMIM YAHYA) (ASTHA CHANDRA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 16/05/2023 Veena Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member ITA No.4019/Del/2019 5 Date on which the approved draft comes to the Sr. PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order